Andrew Fay, chief executive of Cavanagh Financial Management, answers questions from Will Jackson (fundstrategy).
fundstrategy
Cavanagh's brief aims to enrich in long term |
| 2 April 2007 |
Andrew Fay, chief executive of Cavanagh Financial Management, answers questions from Will Jackson. |
Q: What is the history of Cavanagh Financial Management? A: The business was set up in 1996 by myself, Simon Redgrove, our managing director, and Neill Millard, a director on the board. I have worked with Simon since 1990. We all saw a big opportunity in advising the professional market and, initially, our focus was on the legal market in London. We listed on Aim [the Alternative Investment Market] in 2001 and raised £1.5m. This helped us to grow more aggressively and we increased our turnover in the subsequent year to £4.5m. In 2003 we acquired Ernst & Young Financial Management. This gave us a national presence - we had been based purely in London and the South East - and the acquisition provided a wider customer base in the individual and corporate markets. In the last quarter of 2004 we set up Corporate Pensions Risk Management, our actuarial arm. We have nine offices - six in England and three in Scotland - and 65 advisers, with 170 employees in total. We have 56,000 clients, including corporate members, and assets under administration of well over £1bn. Q: How much of your business comes from corporate clients? A: It is in the region of 25% and we see good opportunities for growth in the corporate market. Q: What services do you provide for private clients? A: We offer a wide range of services and expertise. Our clients mainly have advice from two advisers. As well as our core services, we look at tax mitigation, structured products and working with discretionary managers. Our aim is to provide a long-term financial strategy. Q: Which products do you advise on? A: It is the full range, whether it be investments, pension arrangements or protection. Our investment process is supported by Dynamic Planner, a risk profile asset allocation modeller. The products become part of the end solution, to help clients meet their objectives. Q: Do you have a minimum investment level? A: We do not operate a minimum investment level. We look at where we can add value and price our services accordingly. This may involve fees and/or commission. We are there to build a relationship with our clients, to ensure that they make the right decisions. Q: What is your client base? A: Our clients are typically the partners and senior partners of professional firms. We have in excess of 2,000 barristers and solicitors, which is a considerable market share. The legal market was one we focused on straight away and we understand their career paths and remuneration packages. This in turn allows us to meet their needs. We have this well-balanced with the corporate and high net worth markets - it is a nice mix. Q: How does your discretionary service work? A: We have established a number of relationships over time, and we work with third parties where we see a need. We want to make sure we have a full range of services. But it is a service we need to consider developing internally. Q: Are you fully independent, in terms of the products you offer? A: Yes and we will remain so. Q: What difference has a stockmarket listing made to the business? A: It helped us raise the money we needed, giving us the capability and confidence to grow aggressively. It also means there is greater transparency in terms of how the business is performing. This is important as we grow organically and with acquisitions. Q: Do you plan further acquisitions? A: It is part of our strategy, although we will ensure that any acquisitions complement the existing business model. The key is to find businesses we can work with and add shareholder value. Q: The group published its results for 2006, last month. Pre-tax profits were £882,000, compared with a loss of £388,000 in 2005. Why did the firm make a loss in 2005, and what has turned the situation around? A: Following the acquisition of Ernst & Young Financial Management, and the integration and restructuring, we incurred losses in 2004 and 2005 while the changes took effect. The profit increase has come from the benefits of these changes, including a focus on best practice within the organisation, and making sure we have consistency throughout the business. We have invested heavily in the infrastructure, and one particular area was integrating three back office systems into one. Our advisers now generate annual average income of £239,000, up from £160,000. Part of that increase has come from growth in the market, but also from the hard work in 2004/5. We believe we can make similar progress going forward. We have a good client base of professionals, progressing in their own careers - wealthy individuals who are increasing their net worth. The company is going in a positive direction Q: How do you aim to increase profits? A: We will continue along a similar road to the one we followed in 2006. We have made good progress on the services we offer, and we will continue to look at efficiency. New advisers benefit from strong support services. We have a good base from which to develop our proposition. Q: In the results report to the London Stock Exchange, your chairman, John Campbell, said Cavanagh will look to "generate additional profitability from [its] asset base by maximising [its] client funds under advice". Does this mean there will be less focus on acquiring new clients? A: It will be a mixture of both. We want to make sure we are focused on our clients, but we will be looking for new opportunities at the same time. Q: You note in the same report that 80% of Cavanagh's new business in 2006 was from pensions and investments. Do you expect that to continue? A: Yes. This figure has moved slightly upwards from previous years. We have always been hugely pensions and investments-orientated. Q: You say growth in the wrap market will continue. Which wraps do you use? A: We use James Hay's Abbey Wrap. Q: It was announced in last month's Budget that the mini cash and maxi Isa investment limits will rise to £3,600 and £7,200 respectively, next year. Do you think the increases were reasonable? A: It was an opportunity missed, in the context of how much the limits have risen over the years, against the net worths of individuals in this country. Any increase is encouraging but this is not going to make much difference. Cavanagh Financial Management was formed as a partnership in 1996, with a focus on providing independent financial advice to the legal sector. The firm was floated on the Alternative Investment Market in 2001, before acquiring Ernst & Young Financial Management in 2003. Cavanagh has six offices in England and three in Scotland. It employs 170 staff. The firm has more than £1bn in assets under administration. |